The dollar might be breaking out and that could be bad news for stocks – CNBC

The Dollar Index is bucking up against 2-year highs in a run-up that has some strategists wondering if it could be ready to break out.

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If that’s the case, stock market strategists say it could start to negatively impact stock prices and threaten earnings gains.

“The market is wrestling with whether this is the real breakout or not. We’ve had quite a day today ahead of the big [GDP] number tomorrow,” said Marc Chandler, chief market strategist at Bannockburn Global Foreign Exchange. “I think there will be a bit of ‘buy the rumor, sell the fact.’ They’re already looking past Q1 GDP. What’s really going to matter to the Fed is Q2 data.”

Chandler said the dollar started its latest leg higher last week after U.S. March retail sales jumped a surprise 1.6%. It has gained 1.2% since then. In addition to strong U.S. data, there was a round of weak European PMI manufacturing data, another factor pushing the dollar up against the euro. U.S. GDP data is reported at 8:30 a.m. Friday, and first quarter growth is expected at 2.4%.

Dollar/yen hit a new high for the year of 112.40 Thursday, but then fell back below 112. Chandler said the dollar also reached its high for the year against the euro. The euro was at $1.128 to the dollar late Thursday.

“If we go through $1.10 in the euro, people will be talking about $1.05 and parity coming back,” said Chandler. But Chandler said he believes the rally is getting ahead of itself, for now.

“I do think if this dollar rally stays in tact, what we need is divergence,” said Chandler, meaning the U.S. economy would continue to outperform.

To stop the dollar’s rise against the euro, Chandler said there would need to be real signs that Germany is past the worst and its manufacturing sector is picking back up.

For now, he does not see the dollar making a big gain now, but eventually the dollar index could rise above 100.

“Europe’s the real risk right now. They’re the laggards here, and I’d worry about the dollar break out more, if we saw Europe continue to struggle,” said Paul Christopher, Wells Fargo Investment Institute head of global market strategy. “It’s still not part of our forecast.”

Christopher said if the dollar did continue to gain, it would bite into profits and hit stock prices. However, he expects the greenback will ultimately be lower this year against both the euro and yen though it could see strength in the next couple months.

Christopher said a positive outcome would be if China’s economy stabilized, helping the U.S. and then Europe

He is concerned, however, that volatility could pick up, and that there are some risks to the market, including the so far unresolved trade negotiations between the U.S. and China.

Bespoke, in a note, said typically when the dollar strengthens stocks with high international sales tend to fall. “That hasn’t been the case recently, though, as the ‘internationals’ have been outperforming even as the dollar has been rallying…We would expect the “domestics” to start outperforming “internationals” in the near term as long as the dollar doesn’t take a big hit. If the dollar keeps rallying, you’re almost certain to hear about its negative impact from the “internationals” that derive so much of their revenues outside of the US,” Bespoke wrote.

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AMZN – Amazon Boosts Fees for Free Delivery on Online Grocery Orders

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MCD – McDonald’s earnings haven’t been hit by higher prices, as ‘it just seems like Americans are more upset by the change in price at grocery stores’

Rising prices have kept diners away from many restaurants, but not McDonald’s Corp. As the ubiquitous burger chain prepares to report fourth-quarter results on Tuesday with its stock close to record highs, Wall Street could get pickier about signs of the company’s growth, though analysts were largely upbeat heading into the report. Some said McDonald’s
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size made it a “defensive” play within the fast-food universe, as the industry tries to pay workers more and handle higher ingredient costs, resulting in higher prices for its food.

Restaurant analyst Mark Kalinowski, chief executive of Kalinowski Equity Research, says consumer unrest with higher prices for food is focused elsewhere, though. “They’re not talking about the price of eggs at Denny’s
DENN,
+1.26%,
” Kalinowski said. “They’re talking about the price of eggs at their local grocery store. Even though Denny’s has taken price like a lot of chains have, it just seems like Americans are more upset by the change in price at grocery stores and supermarkets.” McDonald’s has consolidating its grip on the hamburger-focused fast-food industry, after the pandemic gutted many smaller restaurants and left those that survived struggling with higher costs. As independent restaurants and bigger chains raise their own prices — to either offset those costs or to gauge what people will pay — concerns have grown about the impact on demand. See also: Why McDonald’s, Google and other big businesses may face responsibility for many more workers But BofA data showed a widening gap between McDonald’s U.S. same-store sales and those of its rivals since the pandemic hit. When the company reported third-quarter results in October, management noted gains from “strategic price increases and positive guest counts” in the U.S. And it recently rolled out a plan to speed up restaurant openings, improve classic menu items and expand its digital-ordering capabilities. Kalinowski attributed McDonald’s traffic to its ability to stay relevant among younger consumers — along with its thousands of stores and digital and drive-through capacity. He noted the popularity of the chain’s celebrity meals — such as those based on the preferences of Travis Scott and J Balvin — Happy Meal collaborations and, in a throwback to the 1980s, Halloween buckets. He added that even as restaurants, more broadly, raise prices, they’ve been spared some of consumers’ anger over inflation. Kalinowski also noted that Chick-fil-A was becoming a larger object in McDonald’s rearview. “I think McDonald’s realizes, for the long term, that’s a competitor that they need to keep a close eye on,” he said. What to expect Earnings: Wall Street expects McDonald’s to earn $2.46 a share for the fourth quarter, according to FactSet, up 10% from the same quarter last year. Estimize, which crowdsources projections from hedge funds, academics and others, has a consensus of $2.51 a share.  Revenue: McDonald’s is expected to report sales of $5.72 billion, according to FactSet, down around 5% from a year ago. Estimize contributors on average expect $5.8 billion. Same-store sales are expected to rise 8.6%. Stock movement: McDonald’s stock has declined in the session following six of the past eight quarterly earnings reports, but four of those declines were by less than 1%. Shares have increased 8.4% in the past year, as the S&P 500 index
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has declined 8.2% and the Dow Jones Industrial Average
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+0.08%
— which counts McDonald’s among its 30 components — has dropped 2.2%.What analysts are saying U.S. same-store sales will again be a focus for analysts, as will Europe, currently mired in a cost-of-living crisis, and China, which is trying to navigate a post-zero-COVID era. They have questions about competition from rapidly-growing Chick-fil-A, and whether McDonald’s can offer up a chicken sandwich that holds up in comparison. UBS analysts said McDonald’s stock was “well-positioned given defensive attributes in an increasingly difficult macro” environment. They also said they believed that “customer demand in Europe stayed largely resilient.” For more: SEC charges ex–McDonald’s CEO Easterbrook for making false statements relating to his 2019 ouster Elsewhere, Stephens analyst Joshua Long noted “successful price/value messaging across key platforms (breakfast, $1/$2/$3 value menu, and 2 for $6, as examples) with a focus on/around core menu items” in the U.S. Chief Executive Chris Kempczinski, during McDonald’s earnings call in October, said restaurants’ own higher costs — along with the politics of managing its ranks of independent franchise owners — would keep any discount war at bay. “Our expectation is that the industry is going to stay rational from a pricing standpoint,” he said. “And I think part of that is just going to be borne out of self-interest, which is everybody is experiencing the food and paper inflation. Everybody is experiencing the labor inflation.” “And some of our competitors, their franchisees are not in the same position as our franchisees,” he continued. “So I think even if there’s a desire to try to get more promotional in some areas to address maybe any traffic headwinds that somebody might face, I think you’re going to run into a lot of resistance from franchisees who are just not going to be in a position to engage in that.”

IBKR – Interactive Brokers: Big Profits From Volatility

JuSunNo one can say for sure where the market will go in the near term, and no matter what, nearly everyone may agree that there will be plenty of volatility along the way. A good way to hedge against market volatility is to buy stocks that benefit from volatility itself. One such firm that stands to benefit from this is Interactive Brokers (NASDAQ:IBKR). With plenty of market ups and downs over the past few years, IBKR has continued to benefit. This is reflected by the 34% total return it’s provided since my last bullish take on the stock in late 2020, far surpassing the 10% return of the S&P 500 (SPY) over the same timeframe . In this article, I highlight why IBKR is currently a Buy for long-term growth investors. Why IBKR? Interactive Brokers Group is an online broker that’s widely used by professional traders and retail investors alike. It provides automated trade execution on securities, fixed income, commodities, and foreign exchange on a 24/7 basis to over 150 markets across 33 countries and 26 currencies with a single, integrated investment account, providing ease and simplicity to its clients. It has 2.0 million client accounts and $287 billion worth of client equity under custody. IBKR’s key competitive advantage is its aforementioned global reach and investments in technology to enable high speed execution. Its built-out platform and scale results in diminishing costs, and is reflected by its strong gross profit margin of 88%, which is well in excess of the 64% sector median. Meanwhile, IBKR continues to benefit from global volatility, as commission revenue increased by 3% YoY to $331 million during the fourth quarter. This was driven by higher customer futures trading volume and large average trade size in options, partially offset by lower customer stock trading volume. This makes sense as the fourth quarter was largely a down market for most stocks, with many investors utilizing options to bet where they believe the market is headed in this new year. Moreover, IBKR is largely benefitting from higher interest rates as net interest income rose by 92% YoY to $565 million. Importantly, IBKR is seeing strong new customer acquisition, as total accounts grew by 31% YoY to 2.0 million. Looking forward, IBKR is well-positioned as it continues to offer the lowest U.S. margin rates compared to its large brokerage peers, with rates ranging from 3.6% to 4.6% for IBKR Pro. IBKR also doesn’t spend a substantial amount of capital on marketing like its peers, as most of its account growth is by word of mouth. Management estimates that accounts grow at a 10% annualized rate during down markets, and 20% during up markets. Moreover, the first quarter of 2023 is lookup up from a market performance standpoint, which bodes well for IBKR’s common equity trading volume this quarter. Management is also upgrading its platform by adding new products and aims to maintain its lead in the options market, as noted during the recent conference call: We are at the cutting edge of this best execution through auction process. We were the largest market makers in options for over 30 years, so we are very well-versed in these processes, and we have been keeping them up to date over the years. With the potential for a new regulatory process, in addition to new exchanges and continuously evolving new rules, we have a team of programmers regularly engaged in this activity. We introduced more new products and expanded the capabilities of existing ones. Recognizing our global customer reach, we introduced GlobalTrader, a streamlined version of our platform for mobile devices, which allows our clients to trade in over 90 stock markets worldwide. We continue to enhance our options trading tools, from mobile options trading to our rollover options tool, Strategy Builder, and Probability Lab. Importantly, IBDKR carries a very strong balance sheet with $3.2 billion in cash and equivalents with no long-term debt, and over 99% of its balance sheet is comprised of liquid assets. Management is also highly aligned with shareholders, with a 76% ownership stake in the company, which is very high for a publicly-traded company. Lastly, I see value in the stock at the current price of $77.51 with a blended PE of 18.6, sitting well below IBKR’s normal PE of 26.7. Analysts have a consensus Strong Buy rating with an average price target of $102, translating to a potential one-year 32% total return. IBKR Valuation (FAST Graphs) Investor Takeaway Interactive Brokers is by far the most innovative broker in the industry, and continues to benefit from its strong global reach, platform upgrades, and efficient low cost structure. It’s seeing strong customer account growth due largely to word of mouth, and should continue to benefit from market volatility and high interest rates. It also carries a strong balance sheet and has high alignment of interest with shareholders. Lastly, I see value in the stock at the current price for potentially strong long-term returns.

LUV – ROSEN, NATIONAL TRIAL LAWYERS, Encourages Southwest Airlines Co. Investors to Secure Counsel Before Important Deadline in First Filed Securities Class Action Initiated by the Firm – LUV

New York, New York–(Newsfile Corp. – January 29, 2023) – WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of the securities of Southwest Airlines Co. (NYSE: LUV) between June 13, 2020 and December 31, 2022, both dates inclusive (the “Class Period”), of the important March 13, 2023 lead plaintiff deadline in the securities class action commenced by the Firm. SO WHAT: If you purchased Southwest Airlines securities during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement.WHAT TO DO NEXT: To join the Southwest Airlines class action, go to https://rosenlegal.com/submit-form/?case_id=10716 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email pkim@rosenlegal.com or cases@rosenlegal.com for information on the class action. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than March 13, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources, or any meaningful peer recognition. Many of these firms do not actually litigate securities class actions, but are merely middlemen that refer clients or partner with law firms that actually litigate the cases. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered hundreds of millions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs’ Bar. Many of the firm’s attorneys have been recognized by Lawdragon and Super Lawyers.DETAILS OF THE CASE: According to the lawsuit, throughout the Class Period, defendants made materially false and/or misleading statements and/or failed to disclose, among other things, that: (1) Southwest Airlines continuously downplayed or ignored the serious issues with the technology it used to schedule flights and crews, and how it stood to be affected worse than other airlines in the event of inclement weather; (2) Southwest Airlines did not discuss how it’s unique point-to-point service and aggressive flight schedule could leave it prone in the event of inclement weather; and (3) as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.To join the Southwest Airlines class action, go to https://rosenlegal.com/submit-form/?case_id=10716 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email pkim@rosenlegal.com or cases@rosenlegal.com for information on the class actionNo Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.Follow us for updates on LinkedIn: https://www.linkedin.com/company/the-rosen-law-firm or on Twitter: https://twitter.com/rosen_firm or on Facebook: https://www.facebook.com/rosenlawfirm. Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm’s attorneys are ranked and recognized by numerous independent and respected sources. Rosen Law Firm has secured hundreds of millions of dollars for investors.Attorney Advertising. Prior results do not guarantee a similar outcome. ——————————-Contact Information: Laurence Rosen, Esq.Phillip Kim, Esq.The Rosen Law Firm, P.A.275 Madison Avenue, 40th FloorNew York, NY 10016Tel: (212) 686-1060Toll Free: (866) 767-3653Fax: (212) 202-3827lrosen@rosenlegal.compkim@rosenlegal.comcases@rosenlegal.com www.rosenlegal.comTo view the source version of this press release, please visit https://www.newsfilecorp.com/release/152815